OVERVIEW

For 2016/17, global production is raised this month on a larger Brazilian crop. Trade is revised lower on smaller imports for Indonesia, Egypt, and Brazil. Exports are lowered for India and Vietnam, but raised for China. Global stocks are revised lower.

FEATURE

Mexico is the largest rice importer in the Western Hemisphere and the top market for U.S. rice on a product-weight basis. On March 2, 2017, Mexico implemented a tariff-rate quota (TRQ) that will allow 150,000 MT of all types of rice from any origin to enter Mexico duty-free through December 31, 2017. Outside of this TRQ, non-FTA partners face a 9 percent tariff on paddy rice and 20 percent tariff on all other types. U.S. rice, which enters duty-free under NAFTA, held 80 percent of the market share in 2016. Most of Mexico’s imports are paddy rice, which have been supplied solely by the United States.

This is not the first time Mexico has loosened rice trade barriers. In 2008 when prices were escalating globally, it removed duties on imports from all origins. Initially, small quantities of competitively-priced South American rice entered the market. However, a decline in domestic milling capabilities in 2011 contributed to the expansion of milled rice imports not only from the United States, but also South America and even Asia. In January 2015, duties were reinstated and the United States regained some market share.

Whereas the prior action to remove duties was for rice at any quantity, this new instance is limited in tonnage. The TRQ volume is approximately the same amount imported from non-U.S. origins in 2014. The United States is expected to remain the dominant supplier, but recent history suggests that other suppliers will likely gain additional sales.

PRICES

Fragrant rice, which includes jasmine and basmati, is a niche within total rice trade and generally sells at a significant premium to regular white rice. India is the main source of basmati trade, although some is supplied by Pakistan. Thailand is the major jasmine exporter, with smaller amounts sold by Vietnam, Cambodia, and Laos. Thai government policy over the past couple of years has encouraged jasmine production, and the abundant supplies have resulted in declining prices. Basmati prices in India were stagnant throughout much of 2016. However, they saw strength toward the end of the year on improved export prospects to Iran, the second largest basmati importer. In early 2017, Iran further reduced its trade barriers, which led to a continued escalation of the price. Indian basmati is now quoted at $1,500/mt, more than double the Thai jasmine quote at $600/mt. This significant spread is likely one factor in Iran currently tendering for 30,000 mt of Thai jasmine rice, more than it has purchased of this fragrant variety in the past 5 years.

SELECTED TRADE CHANGES for 2017

  • Brazil imports lowered 100,000 tons to 600,000 on a larger crop.
  • Egypt imports cut 150,000 tons to 150,000 on reduced government purchases from abroad, as domestic procurement has improved.
  • Guinea imports are raised 100,000 tons to 600,000 on large purchases of parboiled rice.
  • Indonesia imports are trimmed 200,000 tons to 800,000 on indications of sufficient domestic supply.
  • China exports are boosted 225,000 tons to 500,000 on higher volumes to East Asia and West Africa.
  • India exports are lowered 300,000 tons to 10.0 million on slower pace and stronger competition in West Africa.
  • Vietnam exports are lowered 200,000 tons to 5.6 million on reduced trade to Southeast Asia and Africa.

SELECTED TRADE CHANGES for 2016 – based on trade data

  • China imports are raised 100,000 tons to 4.6 million.
  • Indonesia imports are cut 100,000 tons to 1.0 million.
  • Saudi Arabia imports are trimmed 100,000 tons to 1.4 million.
  • Burma exports are raised 132,000 tons to 1.3 million.
  • India exports are lowered 160,000 tons to 10.0 million.